Embassy of Finland Increases Support by €200,000 for IFC Mozambique Small Business Initiative

Maputo, Mozambique, May 15, 2006—The
Embassy of Finland and the International Finance Corporation, the private
sector arm of the World Bank Group, today signed an amendment confirming
an additional contribution of €200,000 from the Finnish government to
the IFC Mozambique SME Initiative (MSI). The added contribution will
support MSI investments in Mozambique’s growing forestry and forestry
products sector.

Finland’s policy considers international development cooperation in the
context of its broader foreign policy, which aims to:

Promote global security

Reduce widespread poverty

Strengthen human rights and democracy

Prevent global environmental problems

Encourage economic dialogue

Mozambique
is Finland's main long-term partner country, with total development aid
to Mozambique at around €million annually. Most of the funds are channeled
through direct budget support and through sector funds: health, education,
and rural development. In addition the embassy has at its disposal a fund
that can be used to enhance economic cooperation. IFC's Mozambique SME
Initiative is a good example of this cooperation.

MSI is an IFC pilot program aimed at building a portfolio of viable client
companies, whose improved operational and financial results over the next
four years will in turn stimulate interest from new investors in the country’s
small businesses. To date, over 16 companies have received investment
advice and technical assistance; one loan has been disbursed to a
woman-run print company, Spectrum Graphics Limited , and a second commitment
to a water purification and bottling factory, Swissta, was made this month.

MSI is one of the latest in a series of small business partnerships between
donor agencies and IFC, an organization whose strong implementation capacity
derives from more than 600 full-time small business development specialists
in the field worldwide and a Washington-based headquarters staff with expertise
in business and finance as well as development. IFC and the Swiss and Finnish
governments are contributing resources to the initiative, with others expected
to join in the near future.
Despite an improving investment climate, local companies in Mozambique
find it difficult to attract capital from private investors. Although several
effective programs already serve microenterprises, small and medium businesses
can do many things that microenterprises cannot do, such as generate new
tax revenues, export their products, or form competitive local industries.
They also offer workers more secure and better-paying jobs, as well as
opportunities for training, potential for career advancement, health and
safety protection in the workplace, and pension and insurance benefits.
In almost every country that has substantially reduced poverty and created
a sound middle class, the local small business sector has played a critical
role. But small and medium enterprises face enormous unmet needs.

The MSI investments, which range between $100,000 and $1 million, are made
on a fully commercial basis in existing businesses with strong growth potential.
Technical assistance is an integral part of the investment program and
provides customized, hands-on, financing to selected small businesses to
prepare them to qualify for direct financing from the investment program
and to develop successful, sustainable practices postinvestment. These
businesses also benefit from the environmental and safety review and from
the IFC Against AIDS program, which supports the implementation of HIV/AIDS
strategies in the workplace. Once a portfolio of sustainable small
businesses has been successfully developed, the longer-term goal is to
develop the initiative into a self-supporting and viable investment vehicle
owned by the private sector.

Mozambican small businesses can benefit from an integrated package of financing
and technical assistance to expand their firms. In the longer run, additional
small businesses will benefit from the project as there will be a new financial
institution that can provide services to them and serve as a model elsewhere.
Local providers of consultancy services will also benefit from the initiative
as it also aims at improving local resources for technical assistance.
For more information, visit www.ifc.org/ifcext/gms.nsf/Content/Mozambique+Initiative.

The International Finance Corporation, the private sector arm of the World
Bank Group, promotes sustainable private sector investment in developing
and transition countries, helping to reduce poverty and improve people’s
lives. IFC finances private sector investments, mobilizes capital in the
international financial markets, helps clients improve social and environmental
sustainability, and provides technical assistance and advice to governments
and businesses. Its 178 member countries provide its share capital and
collectively determine its policies.

From its founding in 1956 through FY05, IFC has committed more than $49
billion of its own funds and arranged $24 billion in syndications for 3,319
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY05 was $19.3 billion for its own account and $5.3 billion held
for participants in loan syndications. For more information, visit
www.ifc.org.